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The Consumer Financial Protection Bureau recently announced a change in the way financial institutions, service providers, and others can obtain informal guidance on regulatory issues from the CFPB’s staff. It appears that the only change is the access vehicle to use when posing questions.

In the past, the CFPB preferred that questions be posed via email to CFPB_reginquiries@cfpb.gov. Now persons wanting answers to regulatory questions can use a new online form (https://reginquiries.consumerfinance.gov/). The new form provides a dropdown menu that allows the user to choose from the proverbial alphabet soup of regulations, along with an “Other” box. Users also can specify a particular statutory code section. However, the box provided for the user to pose the question has limited formatting options. As just one example, there is apparently no way to upload an attachment, which of course was an option when questions were sent via email. It remains to be seen whether the new formatting limits will make it more difficult to seek and obtain confirmation of an interpretation.

Other elements of the prior system seem to be unchanged. Responses to questions will still take time. The CFPB estimates an average of 10 to 15 business days, but acknowledges that longer time frames might be expected, depending on the volume of questions, the amount of time needed to research the question, and staff availability. Presumably a longer response time might also be expected if the question poses policy issues that CFPB staff must discuss and resolve prior to responding. Also unchanged is the CFPB’s position that responses will not constitute official CFPB interpretations and “are not a substitute for formal legal counsel or other compliance advice.” The CFPB notes, for example, that it will not moderate disputes, provide guidance on matters under examination or investigation, answer questions about specific business plans, or provide guidance on laws that are not under the CFPB’s authority.

While it appears the CFPB is attempting to improve its process for fielding questions concerning regulatory issues, it remains to be seen if this is truly an improvement for the public, or merely a way to simplify the process for the CFPB.

After leaving residential mortgage lenders guessing for many years, the California Department of Business Oversight (“DBO”) finally provided the industry with some guidance on the documentation licensees may use to verify compliance with the state’s per diem statutes.

The California per diem statutes (Financial Code § 50204(o) and Civil Code § 2948.5) prohibit a lender from requiring a borrower to pay interest for more than one day prior to the disbursement of loan proceeds, subject to some limited exceptions.

In 2007, the DBO issued Release No. 58-FS (the “2007 Release”), which provided guidance on acceptable evidence of compliance with Financial Code § 50204(o):

  • A final, certified HUD-1 that reflects the disbursement date;
  • Written or electronic records of communications between the licensee and the settlement agent verifying the disbursement date of loan proceeds and identifying the name of the settlement agent providing the information and the electronic or business address used to contact the settlement agent; or
  • Contemporaneous written or electronic records of oral communications between the licensee and the settlement agent verifying the disbursement date of loan proceeds and identifying the name and telephone number of the settlement agent providing the information.

Of course, much has changed since 2007, including the enactment and implementation of TRID, which replaced the HUD-1 with the Closing Disclosure.  Continue Reading Carpe Per Diem Redux — California Clarifies How to Document Compliance

The California Department of Business Oversight* (“DBO”) appears to have backed off of its pronouncement late last year that lenders may not deliver per diem disclosures to all borrowers.

California’s infamous per diem statutes (Fin. Code § 50204(o)Civ. Code § 2948.5) have been the basis of scores of licensing agency examination findings and actions for many years now, resulting in significant refunds and penalties. In fact, just last week the DBO announced that a lender had agreed to pay a settlement of $1.4 million for per diem violations. That is just one of many such settlements that often run into the many hundreds of thousands of dollars or more. One reason for this is the lack of certainty in agency interpretation. Just one example of that uncertainty was addressed by the DBO at the California Mortgage Bankers Association’s (“CMBA’s”) Legal Issues and Regulatory Compliance Conference this past December.  Continue Reading Carpe Per Diem Disclosure — California Department of Business Oversight Clarifies its Position

The Consumer Financial Protection Bureau (CFPB) has offered its new mortgage servicing rule for public inspection today, meaning it is scheduled to be published in the Federal Register on October 19, 2016.  The CFPB informally released the rule on its website in August.

The effective date of the rule is tied to its publication date, so the bulk of its requirements (with some exceptions) will take effect in 12 months, on October 19, 2017.

To learn more about the rule, read our Mayer Brown white paper.

Some segments of the marketplace lending business model (a subset of the growing FinTech industry sometimes referred to as peer-to-peer lending), might become subject to additional regulation if the federal and state regulatory agencies take to heart the results of a recent Treasury  Department report. Continue Reading Treasury Department Issues Marketplace Lending Report, Outlines Possible Regulatory Path

The Consumer Financial Protection Bureau (CFPB or Bureau) has come under criticism recently for its heavy handed approach to regulation, including “regulation by enforcement”. Perhaps partially in response to those criticisms, and certainly in response to a January 2016 industry trade group request to the CFPB to publish unofficial guidance in the Federal Register, the CFPB issued a letter to the residential mortgage lending industry on April 28, 2016.  In that letter the Bureau acknowledged there are “operational challenges” with the TILA / RESPA Integrated Disclosure rule (commonly known as TRID or Know Before You Owe).  The Bureau promises to engage in formal rulemaking in late July of 2016, to propose changes to TRID that will provide “greater certainty and clarity” to the mortgage industry.

In what might qualify as understatements of the year, CFPB Director Cordray said he recognizes that “incorporating some of the Bureau’s existing informal guidance whether through webinar, compliance guide, or otherwise, into the regulation text and commentary would be helpful” and that “there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”  This is in stark contrast to remarks Director Cordray has previously made in which he resisted formalizing the informal guidance and amending TRID to address ambiguities.

Since its October 3, 2015 effective date, TRID has posed a number of issues for the mortgage banking industry. One hurdle involved coordinating implementation with all interested parties, such as mortgage brokers and correspondents, title companies, loan origination system software vendors, and other vendors.  Exacerbating the implementation issues was TRID’s ambiguity in a number of areas, and its outright failure to address many issues.  For example, the mortgage industry has struggled with issues such as how minor or technical errors may be corrected (such as alignment or shading of forms, rounding errors, check boxes that are improperly completed on the Loan Estimate, and data fields on the Loan Estimate that are not subject to either tolerances or redisclosures), and what penalties, if any, attach to those errors.   Equally problematic has been uncertainty as to the conditions under which a Closing Disclosure may be cured, how to account for lender credits, disclosure of title insurance premiums, and disclosure of construction loans.

This lack of clarity has caused significant problems in the secondary market, particularly with the jumbo loan market. Because of the issues noted above and other issues, secondary market investors are often unwilling to purchase loans with minor technical violations, or with issues as to which the TRID rule is unclear.

While Director Cordray did not offer any details of what changes the CFPB might propose, the industry is hopeful the rulemaking will address the above noted issues and other issues the industry has pointed out to the CFPB. Director Cordray has promised that the Office of Financial Institutions, together with the CFPB’s Regulations and Markets teams, will hold one or two meetings in late May or early June before the Bureau issues its Notice of Proposed Rule Making (NPRM), to discuss issues with the industry.  This will hopefully be an opportunity for the industry to offer input before the proposed rule is issued.